Carillion investor tells MPs it considered suing contractor after first profit warning

Investors have supplied evidence to MPs conducting an enquiry into Carillion's failure

Carillion went into compulsory liquidation last month

A major shareholder of Carillion PLC (LON:CLLN) considered suing the collapsed contractor on the suspicion that managers had underplayed the deterioration of the business in the lead up to its first profit warning last July.

Kiltearn Partners, which held 10% in Carillion, told MPs that it mulled legal action against the company with a view to recover a proportion of its clients’ losses.

Carillion entered compulsory liquidation in January after failing to secure a rescue deal with lenders or the government.

Kiltearn is among a group of former shareholders who submitted evidence to the Work and Pensions and Business Committee conducting an inquiry into Carillion’s demise. The evidence was published on Monday.

The Scottish investment firm suspected Carillion’s directors knew it was in difficulty before announcing a £845mln writedown of key contracts and a profit warning in July. It sold its final shares on January 4, shortly before Carillion went into liquidation.

Investors raised concerns with management before collapse

MPs revealed that some investors held onto their stakes to influence executive decision-making while others cut their losses and fled.

Standard Life Aberdeen PLC (LON:SLA) told MPs that it started to reduce its 10.8% shareholding from December 2015 and completely exited the business in July 2017 on concerns about the way Carillion was managed.

The company had met with Carillion’s board on multiple occasions to raise issues about the outsourcer’s performance and mounting debts before selling its stake.

"It was felt that management was not giving sufficient weight to the probability that trading may deteriorate further, or to the downside risk from this scenario given the high level of debt," Standard Life Aberdeen said.

Canadian investor Letko Brosseau also attempted to meet Carillion's finance director on four occasions but was regularly snubbed until the company's first profit warning.

Shareholders were 'fleeing for the hills', says MP

Frank Field, chair of the Work and Pensions and Business Committee, said the evidence from investors suggested a “disconnect” with testimony given by directors.

“On one hand the Carillion directors told us all was sunny until a bolt of Qatari lightning hit them out of the blue,” Field said.

"This has been another successful year in which the group has achieved a 25% uplift in NAV, significant lettings successes across recently completed developments leading to a 21.49% increase in contracted rent and a strong performance across our key metrics," said the CEO, John Arnold.

Carillion plc is one of the UK's leading support services and construction companies, employing around 50,000 people, with annual revenue of around £5 billion, and operations across Britain and in Europe, Canada, the Middle East, North Africa and Caribbean.

Carillion plc is one of the UK's leading support services and construction companies, employing around 50,000 people, with annual revenue of around £5 billion, and operations across Britain and in Europe, Canada, the Middle East, North Africa and Caribbean.